How to Influence Credit Card Regulation

Tired of seeing your credit card's interest rates rise unexpectedly? Frustrated with how your credit card bills seem to only get higher? Worried about relying too much on your plastic as the economy tightens?

If so, you're not alone. With the rising costs of gas and food, Americans are leaning on credit cards more than ever. According to the Federal Reserve, consumer credit (largely in the form of credit card debt) increased by $15.3 billion in March 2008, bringing the grand total to $2.56 trillion.

Fed Proposes New Credit Card Regulations

That's no trifling amount of debt, and many Americans are watching helplessly as the amount they owe their credit card issuers snowballs with climbing interest rates, late fees, overdraft charges and other expenses they may not have expected.

Finally, the Federal Reserve has decided to address the issue of unfair practices on the part of credit card issuers. This month, the Fed proposed a set of rules for credit card issuers to follow in hopes of eliminating some of the abusive practices that have sprung up in recent years.

The best part? The Fed is accepting comments from the public, which means you can share your thoughts and suggestions on the new rules. Take a look at the rules and then follow the link to the Fed's website to post a comment.

Proposed Credit Card Regulations

No interest rate increases on outstanding balances: Credit card issuers would be forbidden to increase the interest rate charged on an existing balance, with a few exceptions (a promotional rate expires, the account goes into default, etc.). Issuers would be required to give cardholders a reasonable amount of time to pay off their balances.

How it is now: Card issuers can increase interest rates for various reasons (such as universal default), even when a cardholder's account is in good standing.

Payment allocation to benefit the consumer: When a cardholder has more than one type of credit on a single card (e.g. cash advance + revolving credit), and makes a payment greater than the minimum amount, card issuers would be required to put the payment toward both kinds of debt. Further, card issuers would be required to give cardholders the full benefit of any appropriate promotional (i.e. low) interest rates.

How it is now: Card issuers can put payments only toward the debt with the lowest interest rate, meaning that other balances are still charged interest, and the user owes the maximum amount possible.

No "double-cycle" or "two-cycle" billing: Card issuers would be prohibited from calculating interest based on balances from before the most recent billing cycle.

How it is now: Card issuers that use double-cycle billing can end up charging cardholders interest on balances they've already paid off, but may not have registered yet because of the short length of billing cycles.

Reasonable repayment time: Credit card issuers would be required to give cardholders a "reasonable" period of time to pay their bills. This means that card issuers must mail billing statements at least 21 days before a payment is due.

How it is now: Currently, billing statements must be mailed only 14 days before they're due, though some card issuers choose to send them out earlier.

Limit on startup fees: Card issuers would be banned from charging initial fees (e.g. membership fees, account opening fees, service fees) that add up to more than half a cardholder's available credit. Further, if the total cost of the fees was more than 25% of the available balance, card issuers would have to spread the cost out over the first year, rather than include it as a lump sum at the beginning.

How it is now: Some credit cards include such high fees that cardholders are in the red before they've even used their cards. This can be frustrating for those trying to rebuild credit after bankruptcy.

No forced overdraft fees: Debit card issuers would be required to inform cardholders about any overdraft fees charged for transactions that cause an account to go negative (including debit card purchases, ATM withdrawals, checks, etc.). Cardholders would have an opportunity to opt out of these charges, and choose instead to have their transactions denied.

How it is now: Banks commonly charge high interest on abusive overdraft loans for even small overdrafts. Many banks include this feature automatically, and consumers don't know about it until they overdraw their accounts.

Make Your Voice Heard - Weigh in on the Proposed Credit Card Rules!

Federal Reserve Chairman Ben Bernanke said that these proposed rules are "intended to establish a new baseline for fairness in how credit card plans operate." If you're dealing with credit card debt, you probably agree that credit card issuers seem to have the upper hand in these transactions.

And here's your chance to make that known: visit the Fed's website and submit your ideas.